IDEAS: Sangoma Technologies’ (TSXV: STC) Unified Communications service
offerings are the key to prospering in the new working reality of COVID-19. The
stock's value is up 1000% since first recommended by Investorfile.
price accumulation target of $0.40 for Sangoma Technologies Corp. was reached
on April 24, 2014. For the record, we do not revise share price targets for our
Investorfile Top Ideas - Small Cap Value Stocks. We have positioned our blog to
be one of the first providers of a pragmatic perspective of a small cap company
stock's potential worth, where there may be uncovered value that has been
largely overlooked by the investment community.
It is not often
that Investorfile composes a blog post on the same stock merely three months
apart (See: The
transformation of Sangoma Technologies to a services company sets it apart.)
But, for Sangoma Technologies, we believe it deserves this attention because
its business is weathering COVID-19 better than most and the longer-term demand
for the Company’s Unified Communications service
offerings looks stronger than ever.
Sangoma Technologies (TSXV: STC – C$2.30) describes
itself as a trusted leader in delivering
value-based Communications as a Service (CaaS) solutions for businesses of all
sizes, service providers and OEMs. Sangoma’s offerings include Unified
Communication (UCaaS) and Call
Center as a Service
(CCaaS) business phone systems, both on-premise and in the cloud,
Communications Platform as a Service (CPaaS), SIP trunking services (TaaS), and
telephony hardware, which can also be deployed as a service.
(UC) is a fast-growing market within the telecommunications industry. UC
implies the integration between modes of communications such as text messages,
cell phone, emails, remote conference and video calls, instant messaging,
screen sharing, etc., as well as being able to switch effortlessly between them
to enhance the exchange of information and ideas for a business operation.
to the onset of COVID-19, there were remote conferencing and collaboration
tools available without the same priority of usage. There was a need for them;
however, it wasn’t a pressing one and enterprises having access to UC
infrastructure, either on-premise or though the cloud and latest remote
telecommunication hardware and software tools was essentially a nice-to-have.
But that has changed, and such service and tools is now considered essential
and will likely remain that way in the future.
Even when a vaccine for
COVID-19 becomes available, it seems certain that working practices and set up
will not return to what they were prior to March 2020 and remote working will
become the norm. That said we believe that enterprises will continue to invest
in their UC infrastructure, which is a tailwind for Sangoma’s services.
We noticed that Sangoma Technologies has
financially continued to perform well through these uncertain times, and fiscal
Q3 results (for the period ending March 31) were quite positive, as both
revenues and earnings growth where ahead of analysts' consensus expectations.
Most notably was the growth in the Company’s recurring revenues, which now make
up over 50% of total revenues and is the foundation for future growth and
Investorfile does not want to underestimate
the economic impact of COVID-19 (and the possibility of a second wave). But
aside from Sangoma management's proactive cost-savings initiatives, (discussed
in detail during Company’s recent investor conference calls), we are of the
opinion that Sangoma’s resilient business model, 50%+ recurring revenue base,
significant customer and geographic diversification and the fact that it is a
provider of a mission-critical essential communications service, still provides
downside protection and upside potential for small cap investors.
We note that Management has reconfirmed
Sangoma’s 2020 annual financial guidance (the fiscal period which ends on June
30) with revenues and EBITDA range of C$128-$132 million and C$19-$21 million
Last week, most analysts covering Sangoma
Technologies raised their 12-month stock price targets, the highest now set at
C$3.50 per share.
Sangoma Technologies has been a "top
performing” Top Idea of Investorfile for several years now and our expectation
is it will continue to be. Despite COVID-19, the stock price is up 1000% since
we first recommended the shares as small cap value investment opportunity. (See: Sangoma Technologies: A small cap tech stock trading for
value with prospects of growth.)
The Company has
approximately 73.7 million shares outstanding.
Author Ownership Disclosure: TSXV: STC - Yes
This article is for informational purposes only. This article is based on the
author's independent analysis and judgment and does not guarantee the
information's accuracy or completeness. The information contained in this
article is subject to change without notice, and the author assumes no
responsibility to update the information contained in this article. The
information contained within this article should not be construed as offering
of investment advice. Those seeking direct investment advice, should consult a
qualified, registered, investment professional. This is not a direct or implied
solicitation to buy or sell securities. Readers are advised to conduct their
own due diligence prior to considering buying or selling any stock.
Investorfile.com is not
engaged in an investor relations agreement with Sangoma Technologies
Corporation nor has it received any compensation from Sangoma Technologies
Corporation for the preparation or distribution of this article.
The author of this article has
acquired and may trade shares of Sangoma Technologies Corporation through open
market transactions and for investment purposes only.